Effect Of Venture Capital Upon Listed Enterprises' Governance

In recent years,the venture capital industry has developed prosperously and played a crucial role in China's capital market.Venture capital is an equity investment that is specific to high-risk and high-growth start-ups,which aims at seeking long-term capital appreciation rather than short-term securities trading spreads or dividends,interest income and so on.To ensure return on investment,venture capitalist not only provide financial support to businesses,it is also involved in the management of the invested enterprise,provides management consulting services,helps them design the corporate governance structure,builds management team,supervises and restricts the action of management,thus providing value-added services.Therefore,the effect of venture capitalist on corporate governance has become a topic of concern academia,research on the impact of venture capitalist upon corporate governance has significantly important theoretical and practical value.This paper reviews relevant literature about corporate governance and venture capital at home and abroad.On the basis of that,the text selects 926 listed companies on SME and GEM from 2004 to 2011 as research object.Combining theoretical research with empirical analysis,we establish related models to analyze whether venture capitalist involvement have a positive effect on the corporate governance of listed companies,then we further divide the different characteristics of venture capitalist to explore the effects on corporate governance,finally we discuss whether venture capitalist ultimate exit has some impact on listed enterprises' corporate governance.Through theoretical and empirical analysis,research conclusions were summarized as following: first,venture capitalist involvement has positive impact on the corporate governance of listed companies at the time of IPO year,even four years following the offering,VC-backed firms have higher levels of monitoring;second,different characteristics of venture capitalist will have differentiated influence on the corporate governance of listed companies,venture capitalist that is participated in the invested enterprises,of high stake,being the lead agency and state-owned has a significantly positive impact on the corporate governance of listed companies,while venture capitalist that is joint venture and has foreign background will not have an impact on the corporate governance of listed companies;third,venture capital ultimate exit will have negative effect on the corporate governance of listed companies on SME and GME in China.Firms experiencing a VC exit see a much greater decline in monitoring than those without an exit.And in the end,according to the above conclusions,some relevant policy recommendations about the venture capital industry were also given.